The claim of sharp reduction in effective corporate tax rate to 25.11% does not, in fact, represent any significant reduction in the tax burden that the companies bear at present, and hence, the fiscal instrument available for improvement in corporate investment gets blunted. Apart from frittering away the tax potential, this measure will shift the tax burden to individuals. Also, several non-manufacturing companies and a handful of large companies are likely to benefit from the measure.

Indian Statistical System in a Troubled State: A Viewpoint for Debate - 18/01/2020

The recent furore about key economic statistics in India could only dent the age-old reputation of the official statistical cadre. However, if government control continues trampling upon the autonomy and integrity of the official statistical institutions in the country in this manner, then their reputation of competence and impartiality stands the grave risk of being marred in no time.

Wage Share in Indian Manufacturing: A Disaggregate Analysis at Major Industry Groups - 06/12/2019

Of late, the rising inequality, whether that is in wealth or income, has received the attention of both academic and policy makers. Central to income inequality are the distributional issues; that is labour’s share in income. The International Labour Organisation (2015), in its Global Wage Report 2014/15, argued that rising inequality across the globe was more of a labour market phenomenon. Lower wage rate or disproportionate increase in productivity and wage contributes to income inequality. Lack of paid employment also compounds the problem of income inequality. Wage share in total value added mirrors these labour market developments and thus wage share becomes a relevant issue from the welfare point of view. Generation of employment in the manufacturing sector has remained a major goal of industrialisation in India. Several studies have pointed out declining wage share in this sector, particularly since the early 1990s. Wage share can decline if manufacturing becomes more capital intensive which tends to increase the share of capital in income. Capital intensity differs from industry to industry. Thus, gaining a good understanding of the wage share requires a detailed analysis at the industry level. This paper aims to explore the link between real wage growth and labour productivity and their link with wage share across industries. Findings of this study would contribute to a better understanding of the factors responsible for wealth and income inequality, and also the welfare implications of the changes perceived to be important for ease of doing businesses, of which labour market related issues have become central. This study relies on Annual Survey of Industries (ASI), which is the principal source of data for studies in manufacturing. As the ASI has used different National Industrial Classifications (NICs), this study concords ASI data series at the disaggregate level starting from 1973–74.

The question of state-level trade performance has assumed significance in India with subnational economies increasingly becoming responsible to deliver growth. Although several state governments have been implementing various schemes to promote exports, the central government launched a new scheme in 2002 known as Assistance to States for Developing Export Infrastructure and Allied Activities, the working of which is critically based on information pertaining to a state’s export performance. A major handicap faced while analysing trade performance of states is the availability of data. Attempts have been made to construct statewise exports using data of Directorate General of Commercial Intelligence and Statistics (DGCI&S), captured from shipping bills filed by exporters. However, state-wise import data are not provided by DGCI&S. The schedule of Annual Survey of Industries (ASI) administered by the Central Statistics Office for collecting industrial statistics at the factory level has Block I by which it attempts to capture material inputs directly imported. Using the available information from ASI, this paper provides aggregate estimates of manufactured exports and intermediate imports at the state level. While doing so, this paper works out trade orientation of states by examining import and export intensities. The paper also reports the ratio of net merchandise export earnings to state domestic product across states and over the years. Finally, we undertake an econometric analysis of the determinants of state-level imports of intermediate inputs.

Factor Cost Basis of GDP is Fundamental for Measuring Real Growth and not GDP at Market Prices - 06/12/2019

The authors of the UN SNA have shown no concern for the distributional issues relating to factor incomes. These concerns lead to GDP at factor cost as a measure of real economic growth and not GDP at market prices.

Inter-State and Inter-Regional Disparities in Bank Credit and Other Financial Flows in India in the Post-Reform Period - 13/05/2019

As a backdrop to the theme of this paper, it is worthwhile to digress a while on the evolution of thinking in economic literature on the role of finance in economic development. It is generally perceived that the classical and neo-classical economic theories neglected the role of finance in the growth process. For them, the growth essentially constituted an inter-play of physical quantities – labour supply, capital or saving and investment processes and technical progress. Those theories blithely ignored the role of finance also because “they ignored altogether the issues of distribution, since markets were efficient regardless of the distribution of income.” (Stiglitz 2000:16). In the same vein, even the most Keynesian of all, Joan Robinson (1952:86), had asserted: “By and large, it seems to be the case that where enterprise leads finance follows,” thus implying that finance is a secondary follow-up of the real sector growth process.

Based on the data from the All-India Debt and Investment Surveys, a re-emergence of non-institutional credit agencies in the incidence of household indebtedness is found since the 1990s, especially in the rural areas, reflecting the inadequate social commitments of the institutional agencies due to their contemporary organisational deficiencies. The data, however, do not seem to capture the extent of urban distress in totality. Yet, given the general dearth of evidence on the status of household indebtedness over time, institutions like the Reserve Bank of India and the National Bank for Agriculture and Rural Development should revisit this information to resurrect their roles in strengthening credit delivery to the general population.

Policies of Economic Reforms in India Appear Antithetical to the Path of Inclusive Development: A Proposition - 01/10/2018

The economic reform measures being implemented in India now for nearly three decades can be traced to well-known Washington Consensus doctrine. Many aspects of this doctrine appear antithetical to the policies of inclusiveness pursued in India. Public policy interventions, particularly those favouring social sector development, are found as essential ingredients of " inclusive development" strategy. This requires resource mobilisation from the rich. But, marginal tax rates in India have been drastically moderated during the reform period. The most conspicuous aspect of income and asset inequalities relates to the urban sector. The data from Income tax revenue statistics bring out such growing inequalities. Property taxes covering taxes on wealth, estate and inheritance and gift constitute a ridiculously miniscule amount in India. Urban inequalities are further exemplified by explosive growth in the remunerations of company executives. Inadequate budget resources are reflected inadequate budgetary allocations for social sector development.. For want of resources the social services, essentially health and education, have badly suffered both in quality and equity. India's Inclusive Development Index (IDII) rank has been placed as low as 60 amongst 79 developing economics by World Economic Forum (WEF). The Forum recommends a more progressive tax system to help raise capital for expenditure on infrastructure, health care basic services and education, The paper also concludes that the most dominant consequence of inequality is the narrowing of the domestic market, thus the demand getting restricted to a narrower and narrower basket of goods and services".

A close examination of the recent trends in government finances suggests that the expenditure pattern of the government does not provide any assurance for the future in terms of building adequate social capital. The regressive nature of taxation policy in recent years along with reduced government spending has put additional burden on out-of-pocket expenditure of individuals.

The Index of Industrial Production series, the most significant macroeconomic lead indicator, was revised by the Central Statistics Office in May 2017, two years and three months after revising the National Accounts Statistics series. Even as the new IIP series is more current, growth rates of output do not match those of the NAS. This, along with the significant lag in the periodic revision of IIP, diminishes its usefulness.